In this episode, Chuck Kasky, Maryland REALTORS® CEO, dives deep into housing policy with Dr. Salim Furth, Senior Research Fellow and Director of the Urbanity project at the Mercatus Center at George Mason University, and Lisa May, Maryland REALTORS® Director of Advocacy and Public Policy.
Listen as Chuck, Salim, and Lisa examine the issues of zoning, housing costs, and the effects on Maryland first-time homebuyers. Salim breaks down the intricacies of gentrification and the impact it has on regional affordability and local affordability. Additionally, Lisa discusses the ambitious policy proposed by the Moore administration that may begin to address the lack of housing in Maryland.
Salim Furth is a Senior Research Fellow and Director of the Urbanity project at the Mercatus Center at George Mason University. His research focuses on housing production and land use regulation and has been published in Housing Policy Debate, Critical Housing Analysis, and the IZA Journal of Labor Policy. He has testified before several state legislatures as well as the U.S. Senate and House of Representatives. He frequently advises local government officials on zoning reform and housing affordability.
Furth's writing has appeared in National Affairs, American Affairs, The City, Public Discourse, and numerous newspapers. He previously worked at the Heritage Foundation, at Amherst College, and as a contractor to HUD. He earned his Ph.D. in economics from the University of Rochester.
Featured Research
"Single-Family Zoning and Race: Evidence From the Twin Cities." Published in Housing Policy Debate.
"California Zoning: Housing Construction and a New Ranking of Local Land Use Regulation." (Salim Furth & Olivia Gonzalez)
In this episode, Chuck Kasky, Maryland REALTORS® CEO, dives deep into housing policy with Dr. Salim Furth, Senior Research Fellow and Director of the Urbanity project at the Mercatus Center at George Mason University, and Lisa May, Maryland REALTORS® Director of Advocacy and Public Policy.
Listen as Chuck, Salim, and Lisa examine the issues of zoning, housing costs, and the effects on Maryland first-time homebuyers. Salim breaks down the intricacies of gentrification and the impact it has on regional affordability and local affordability. Additionally, Lisa discusses the ambitious policy proposed by the Moore administration that may begin to address the lack of housing in Maryland.
Salim Furth is a Senior Research Fellow and Director of the Urbanity project at the Mercatus Center at George Mason University. His research focuses on housing production and land use regulation and has been published in Housing Policy Debate, Critical Housing Analysis, and the IZA Journal of Labor Policy. He has testified before several state legislatures as well as the U.S. Senate and House of Representatives. He frequently advises local government officials on zoning reform and housing affordability.
Furth's writing has appeared in National Affairs, American Affairs, The City, Public Discourse, and numerous newspapers. He previously worked at the Heritage Foundation, at Amherst College, and as a contractor to HUD. He earned his Ph.D. in economics from the University of Rochester.
Featured Research
"Single-Family Zoning and Race: Evidence From the Twin Cities." Published in Housing Policy Debate.
"California Zoning: Housing Construction and a New Ranking of Local Land Use Regulation." (Salim Furth & Olivia Gonzalez)
There are many facets to understanding housing policy and its implications on economic development, employment opportunities, productivity, and quality of life. For example, the number of first time buyers continues to fall. Investors are buying up properties, and even entire communities are being developed as rentals. Studies have shown what's known as spatial misallocation of labor across United States cities, and its aggregate costs. This misallocation arises because high productivity cities like New York, San Francisco Bay Area, for example, have adopted stringent restrictions on new housing supply, effectively limiting the number of workers who have access to such high productivity areas. It was calculated that increasing housing supply just in New York, San Jose, and San Francisco, by relaxing land use restrictions to the level of the median US city, would increase the growth rate of aggregate output by 36.3% in this scenario, United States, GDP in 2009. I know it, it's back ways , but the point is, well made us GDP would've been 3.7% higher, which translates into an additional $3,685 in average annual earnings. And that's just one example of the interconnectedness of housing and economic policies. There are many others and so many moving parts. It's extremely difficult to wrap our head around not just the consequences of existing policies, but prescriptions for addressing the negative effects of those policies on a fundamental level. And even giving the widening acceptance of the fact that we are facing a true housing crisis in both a availability and affordability. There's even debate about whether increasing the supply of housing would result in decreased or increased costs. Hello, I'm Chuck Caskey , Maryland Realtors, CEO, and you are listening to Get Real Estate, the Maryland Realtors Podcast. In this episode, we're diving deep into housing policy, meaning peak nerd mode. Our guests today are first Salim Firth . Dr. Firth is a senior research fellow and director of the Urbanity Project at the Mercatus Center at George Mason University. His research focuses on housing production and land use regulation, and has been published in housing policy debate, critical housing analysis, and the ICA Journal of Labor Policy. He has testified before several state legislatures as well as the US Senate and House of Representatives. He frequently advises local government officials on zoning reform and housing affordability. Dr. Firth's writing has appeared in National Affairs, American Affairs, city Public Discourse, and numerous newspapers. He earned his PhD in economics from the University of Rochester. Welcome, Dr. Firth .
Speaker 2:Thank you , Chuck. It's so good to be here today.
Speaker 1:Also, joining the conversation is our own Lisa May, Marilyn Realtors Director of Advocacy and Public Policy. Welcome back to the program, Lisa. Thank
Speaker 3:You, Chuck. I'm ready to get
Speaker 1:Nerdy with you <laugh> . So <laugh> Salim , I'm gonna turn it over to you to talk , uh, let's briefly, but you know, in , in, in enough detail so people get that idea of a couple things I touched on. First of all, did I get anything wrong in the intro?
Speaker 2:Well, so I know the study that you're referring to with those particular numbers, the bad news is those those actually don't hold together. If, if, yeah, okay . Growth was 36% higher for 40 years, we would have way more than 3% of GP . Oh , okay . And they , they made a mistake. The good news is more careful researchers like , uh, Gil Durant and Diego Puga have done research showing substantially the same thing, but with a better foundational model. It gets way nerdier than , uh, I'm gonna try to go in speech <laugh> , but , um, but the , the , the point holds, right? Yeah . So,
Speaker 1:Okay .
Speaker 2:It's kind of obvious to all of us. If you can't move to the city where you can take a good job, of course your personal contribution to GDP is gonna be lower, and GDP is just the addition of yours and mine and Lisa's and everyone else's personal contributions. And we can't do our best work if we can't afford to live near the job where we use our talents to their greatest extent.
Speaker 1:Yeah. Thank you. Thank you for, for clarifying. And I frankly forgot that I put those numbers in. I should have taken them out. 'cause I did know you and I spoke earlier, but point , point taken, let's go back a step. I think there are fundamentally two things I'd like you to address first. Number one, why is it that in a normal market, and, and I am a firm believer that most conventional wisdom, and I read a lot, and I try to stay up on this stuff. I'm not an economist. The , the math makes my head hurt, but I get the point, right? So let's be honest, like we have not entered a recession de , despite what Jamie Diamond and, and all the other, you know, so-called experts said that it was gonna be not only a reception, a recession, but a pretty deep one. And, and they're all wrong. And Larry Summers, I don't care what they say anymore, I really stopped listening to them because they're wrong. They've been wrong, they're gonna continue to be wrong, and we never hold them accountable and we keep putting 'em on tv. But I always thought, and to , to me, it was like, no, but at least this law of supply and demand, at least <laugh>, there was hope. And yet here we are with this supply problem. This demand is so far outstripping supply, skewing pricing, restricting people's ability to find housing. So in your economic terms, in elasticity of supply, and you'll go into that hopefully. And then this notion of hopefully you can weave these together. This thing of that I read it was called Supply skepticism, which is that even, and, and I think you participated in a back and forth with , uh, with another writer who was saying , well, there's some evidence that if you increase supply, that you actually increase prices instead of decreased prices. So it it weave those two together and then we'll, we'll use that in terms of addressing the barriers to creating additional housing supply. Does that make sense?
Speaker 2:Yeah. Alright . Well, there's a, there's a whole like <laugh> career of research. Yeah. There, yeah , there is in that question. Yeah . Yeah . Um, so the , the good news is the laws of supply and demand have not been repealed. Okay,
Speaker 1:Thank you. <laugh> .
Speaker 2:Look, this , there's a fun , a fundamental thing. So I'm joining you right now from my house. Yeah . And the room, I'm sitting in it doubles, is my office and my daughter's bedroom. Uh , she's not thrilled with this arrangement, <laugh> , but , uh, I don't work at night and she doesn't sleep during the day. So it works out. There are thousands and thousands of American families who are doing the same thing. We're spending more time at home. Before the pandemic, she was supposed to go to our local kindergarten all day. Instead she was homeschooled and it worked out so well that she's still homeschooled. Oh , cool . And I used to go to my office four days a week and work from home, just Fridays. Now I work from home two , three days a week. And so we, my family, were spending more time at home. And this story is being told again and again throughout the American economy. And so it's actually just like toilet paper. Remember? Remember the beginning of the pandemic when , oh my
Speaker 1:God, remember that?
Speaker 2:Yeah. You couldn't find toilet paper and it was, it was terrifying. So, you know, part of that was panic buying. Mm-Hmm. <affirmative> . But a big part of it was a real fundamental thing, which is pre pandemic. We did 40% of our business at the office. Mm-Hmm . <affirmative> . And all of a sudden we were doing all of our business at home. And so like the home style toilet paper rolls were in short supply because there was a change in demand. There was a change in our habits. It wasn't a conspiracy, it wasn't people doing things wrong. It was a little bit of that. But mostly it was, Hey, we're, we're doing things differently and industry takes time to adjust, especially during a pandemic. So it took a while. Now the toilet paper industry has figured out, okay, we need to produce so much more home style toilet paper, and there's no more shortage. Unfortunately, our housing market, which obviously takes a lot longer to build , uh, housing than to, than to, you know, run the toilet paper machines for another, you know, shift in the , in the week. But, you know, it takes time. And we have not really proven even that we're on the way to addressing this increased permanent , uh, higher demand for residential space.
Speaker 1:Why?
Speaker 2:Yeah. There's a bunch of reasons. The biggest one is zoning. I do think, you know, and I , maybe you'll say this at the top and then we'll ignore it, but we need to fix zoning. Uh , I believe that we are going to, and I'm working all over the country with governors, mayors, legislators, and people are taking it seriously, really for the first time in a mm-Hmm , <affirmative> a generation or two. I think we're gonna fix it to a substantial extent. When we do, there are gonna be other problems like workforce and financing and the , you know, the cost of building materials. Those, so those are problems we're gonna have to address right now. Let's deal with that first bottleneck, just zoning. And we're , we're never gonna get people to invest in workforce, you know, train yourself to become an electrician doing residential building. But by the way, you don't know if there's gonna be work here next year because we haven't zoned for it. And, and you have to come for us for a rezoning every year to find out if new houses are gonna get built and if you're gonna have a job or, or you might have to go do something else that won't work. Let's get the zoning right. And then we are gonna have to do some work and people are gonna have to, you know, step up and invest in like, the entrepreneurs to do the , the backend stuff. Zoning, you know, about zoning. Zoning says what you can and can't build on every piece of land. Now, sometimes those rules make sense, right? Uh , if you've got a industrial zone or an airport or something like that, you don't want somebody sticking a bunch of houses right in the middle of it where it's gonna be bad for the people living in the houses. It's gonna be bad for the industrial neighbors and somebody's gonna get sued. So I, I have no problem with industrial zoning. We're zoning for maybe a, you know, large scale business, right? You get , you get a lot of traffic. There's no particular reason that the parcel where my house is has to be zoned differently than the parcel directly behind it. One of them is a single family house, the other is an apartment building, and they're, they're immediately next to each other. There's no difference in the location. They could just as well be switched. And it's, it's sort of this pure kind of micromanagement from the county that says, well, you're gonna be zoned this way and you're gonna be zoned that way. And the result is, so again, coming to my house where I'm sitting in my daughter's bedroom, this house long before I bought it was torn. There was an old house here, it was torn down in 2006. And , uh, a developer actually lost a lot of money trying to make money. But , uh, that was 'cause of the recession building a, a much larger house on the place of the old ones. They, they took out a , uh, two bedroom house, built a six bedroom house, and, you know, that's legal, but it would not have been legal to build a duplex here with two, three bedroom houses that, that could have hosted two families. And it worked out for me. I have a large family like I'm, you know, thrilled to have this house, but other people would've been thrilled to have the duplex and probably would've paid more together than I paid a loan . And so it's that zoning that says we've reserved a huge amount of land for , uh, single family homes, and then everything else has to squeeze into the little bit of land that's left over that we said that's multifamily. And of course, if you only have a little bit of land for everything else, well then only the, it's gonna be very expensive and only the biggest things are gonna win there in terms of bidding. So you get large scale multifamily because it , it wouldn't make sense to build duplexes when you could build a tower.
Speaker 1:What do we mean when there are , there are some papers that have written and some back and forth that I think, if I'm not mistaken, you were involved in this thing called supply skepticism, which actually tends to argue, and I'm not gonna pretend to understand, so I'm gonna turn it over to you that are we sure <laugh> , that just increasing supply will ease demand and therefore re at least result in moderation of price increases? Why is there skepticism about whether that's true given what we know about supply and demand and its impact on pricing?
Speaker 2:Great question. Thanks for coming back to that. So I, I'll actually say I've changed my mind on the kind of elementary school level of this or the, the, the okay <laugh> the less crazy version. So the more crazy version is that, you know, if the whole Washington DC area built tons of housing, the price would go up. That's pretty crazy. 'cause that clearly is violating the laws of supply and demand. Yeah. The , the kind of the plausible version, which , uh, my , myself and many other people, you know, economists and, and housing scholars like me, believe for a long time, or at least we're , we're open to, is that while that can't happen at a regional, or say a countywide level, it could happen in a neighborhood. And so you can imagine particularly like a gentrifying context. Maybe you've got a street of kind of rundown houses that were built in the 1930s and people come along and start flipping them into mansions. That pretty clearly seems to raise the price. Now what if instead of just replacing one for one, they replaced some of those with small apartment buildings, right? So you're, you take a lot that had a single, you know, a small bungalow on it and you replace it with 12 units, but they're nice, they're shiny and new. What does that do to the price of housing around it ? And it's plausible, especially in kind of a gentrifying context, that enough different kinds of people move in, right? So instead of being, you know, some kind of working class families who've been there for a long time, and, you know, mind their pocketbooks carefully, you've got a whole bunch of yuppies who are moving in and they like the neighborhood and they start out in the apartments, but then they wanna stay there. And so they're , they're bidding higher for everything else . So it was a plausible story where you get a neighborhood transformed by development in a way that raises prices. And it turns out, so a bunch of people said, well, okay, this might be a problem , and if, so, this is a problem, right? 'cause it means that while we know that the path to regional affordability is to build more, maybe that causes local unaffordability in the process. And that's kind of a nasty side effect , right? So can we, you know, what , how do we have to deal with this? And it turns out that it appears that there's no paradox after all. So a bunch of people have done research on this in a bunch of different ways. And what appears to happen is that when you build a new multi-family building, it soaks up the gentrification demand. So the first thing is that the gentrifiers show up before the developers, right? So the first gentrifiers, they're always buying an old house, fixing it up, or, you know, kind of slumming it in a neighborhood where there aren't any young professionals and they, you know, they're kind of the pioneers if you, you know, that's the language that was used . Sure ,
Speaker 1:Yeah. No , absolutely. Yeah .
Speaker 2:Once they raise the prices enough and sort of put the neighborhood on the map, then the developers say, oh , there's money to be made here. And they come along. So what happens after the developers come along, they end up kind of hoovering up demand for that neighborhood. So it kind of, it what , what it looks like, and this is actually a very much an active research area for myself, it looks like there's some degree of highly localized demand. There are people who are saying, oh, I wanna live in Old Town Hyattsville, and I'm actively looking there 'cause I like that scene. I wanna live where I can walk to those kind of cool retro restaurants. And they're not looking very far away. So if there's a change in housing supply, very local to that area, it affects the prices there and not half a mile away , which is a little surprising. That's not how we thought housing markets work . Mm , yeah . Right . Exactly . And so it looks like there's some degree of inflexibility, like people are a little bit inflexible, or enough people are inflexible on their location that the price difference has to be large to get them to, to kind of broaden their search and look somewhere else. So it turns out, if you say a lot of people wanna move to old Hyattsville, you build a new multi-family building there that soaks them up that says, Hey, come here. The rents are cheaper. We've got nice amenities. And that attracts the young professionals or, or whoever else you're worried about moving into the neighborhood and raising the prices. Um, and takes pressure off the older housing stock. It doesn't stop gentrification. So usually a neighborhood that's already that far down the road to transformation, it's probably gonna keep transform . So this is not, it's not a miracle, but it seems to slow things down. And, you know, all else equal, the people who are say, renting at a pretty low rate in a, in a beat up old building there, they might get to stay for a few more years before the landlord says, Hey, I can make a ton of money flipping this house. And there's, there's a whole bunch of issues there tied up. And I , I don't wanna sound like this solves all the issues around gentrification. I totally recognize that's not the case, but at least construction is not the problem. So for that, that resolves this paradox between does a a , a regional solution hurt locally? And it says no, the regional solution helps disproportionately locally because of this sort of inflexibility in where people are interested in living.
Speaker 1:Hmm . Yeah. And in Baltimore, of course we have Sales Point , Canton, Hamden, Remington, all these neighborhoods. But seemed to me, and I was watching this unfold over the years, it's, it's almost one for one though. It's like you , it's like you said, you move into an older home and, and hopeful maybe you live there while you're fixing it up or you flip it or whatever. But that's, I've seen only recent , more recently, I should say actually, additional housing being built. Does that enter into the equation?
Speaker 2:Yeah, I I mean, Baltimore's a really different story. Yeah, sure. I love Alan Mallek book, the Divided City. I really recommend that to anyone who's really wrestling with these questions. He's, he's a deeply compassionate writer. And, and in , in the book, he's really making the case that, and I , he does this a little bit implicitly, but he's making the case that all the journalists and think tankers like me who live in Washington, New York, Boston and San Francisco, <laugh> , you know, those are cities which have gentrification Mm-Hmm . <affirmative> and where that's an issue. And so we export that to other cities like Baltimore and Cleveland and Detroit. Right. And most neighborhoods, there's a , there's a couple of exceptions, but the vast majority of those cities are dealing with the opposite problem, which is disinvestment. And they're , they're kind of stable home owning , working class, moving to the suburbs. And, you know, African American homeowners are doing what white homeowners did, a generation earlier, which is saying, you know, I don't like the issues in the city and the taxes are too high. I'm gonna move up to the county. And I, I , I would never take that choice away from an individual, but it means that somebody should take their place, right ? Somebody who is excited about the prospect of fixing up a a janky old row house . And it's actually really, really good for Baltimore. Mm-Hmm. <affirmative> , when somebody says, oh, I'm gonna move into this old row house , and isn't it cool it has form stone ? And, you know, the way the Stairs Creek is romantic <laugh> , we need , we need those people. Because otherwise you end up with a decay housing stock. And then neighborhoods that end up with, you know, kind of the, the, the missing teeth and the feeling of insecurity that comes when house is abandoned and the , you know, the lawn is allowed to grow to four feet tall. Far more neighborhoods in Baltimore are dealing with that and have had a significant decline in their home ownership rates and incomes while remaining African American , uh, over, over the past generation. It's far more neighborhoods in Baltimore dealing with that than dealing with the influx of young professionals who, you know, if anything we just say, Hey, you know, find all of Baltimore. It's great. Spread out, make positive changes and , and become good neighbors. People aren't gonna live forever. And, and neighborhoods are always rotating. Ontario Pilla has some great research and , and books on , on Baltimore as well.
Speaker 1:Yeah. And the Black Butterfly is a very good book to dress that. And , and a couple of , back in September we had Nolan Gray as a guest, arbitrary lines, and he was fascinating. I loved that book. I read it twice to get ready for the podcast. So it's also, there's so , so many others. Uh , just, you can search on anything, but, but we know, we know the issue, we know the problem and its zoning. And so I guess Let's flip this up a little bit to ask where do we fit in? You , you have a very, very broad national perspective that, that we don't have. And that's the other reason we were really excited to be able to talk to you. We feel like from what we do know that Maryland, for all of its progressivity in some areas, <laugh>, we feel is way behind the curve. That there are states, cities , uh, counties around the country doing experimenting. And you know, they yell at me when I say, we're not advocating for outlying single family zoning. And I say, well, yes we are. And they say, no, Chuck, you're not allowed to say that. So, but other states have Oregon, for example, they , they've said, we are eliminating single family zoning. We are not there. Obviously we're not. But where do you see us fit in from, from your perspective nationally? Where is Maryland and, and how do we get to a place where we're , we're pretty anecdotally, we're pretty sure we're behind the curve on this. So can , can you give us a kind of a national perspective on where things are really happening? Are they merely moving the needle? And where are we in Maryland as far as the rest of the country?
Speaker 2:Great question. So I think there's two, there's two dimensions to that. One is sort of where are we in terms of where I'd say the last six decades have gotten us. And then the second is , what kind of momentum do we have now? Yeah . Yeah . Um , and I'd say we're doing better on the first , uh, Maryland has a, i I would say pretty good planning tradition. I , I'm often skeptical of planners, especially if you look at what planners in the , the mid 20th century were doing. They were, they were, you know, had really terrible ideas. Maryland has, through through luck, technocracy or governance ended up with some good planners over the years who, you know, built some great transit oriented development along the red line . Mm-Hmm , sure . County who worked hard to integrate Baltimore County. There's a number of things that, you know, the , the people who previously were working on our state did really well. And so the result is, so we're a , we're a high , very high wage state. Yeah . Um , by national standards. Um, and we have a little bit like the fact that Washington DC one of our urban cores is not in the state, makes us more of a suburban state, right. Than most, right. So we have one of our two cities, Baltimore, but the other big city we don't have, and we have it suburbs or half of the cities . So it kind of creates a kind of a , a slightly odder state. And then obviously there's , there's geographic diversity in the east and west. We are well ahead in terms of affordability and the availability of , of different kinds of housing. We're well head of Massachusetts, Connecticut, New York, California, the Pacific Northwest. So those, and you get to consider, those are kind of like blue state peers . We're in much better shape than that . We are not in as in shape as good as say North Carolina, Texas, Arizona, in terms of offering growth opportunities and home ownership, especially to people in working class. And so you'll see working class Marylanders end up moving south 'cause they say, Hey, I can buy a house in , uh, Lynchburg. So friends of mine recently , I just just heard this the other day, we're thinking of moving to , to , to Lynchburg, Virginia, where we can buy a nice big house and have stuff we want. We love living in Maryland, but it's so expensive for such a small house. And so that's, I think, the area where, where we're behind or that's our relative position. So we're, we're not as bad as the sort of the other coastal blue states, but we're definitely not as, as good at providing opportunities as the, the Sunbelt states. The rust belt is its own thing. And I , you know, it's not a great comparison. So, and then in terms of a momentum, we're way behind, again, that's not as bad because, you know, we we're starting out the race ahead of the Massachusetts Mm-Hmm . <affirmative> . But I don't think there's a sense of urgency or, you know, repentance among our legislators yet where, where they say, oh yeah, planning has been the problem and this needs to be addressed. And part of that is that planning has been somewhat better though there's obviously like deep, you know, racist origins and say Baltimore City zoning code and , and many others. Yeah. I, I think there's a good question now with the more administration, they've put out some plans. I wouldn't call 'em ambitious, but certainly , uh, at least not by national standards. They're certainly ambitious by Maryland standards. And they feel like they could, could get a lot more ambitious quickly if the governor was told, Hey, actually the state's behind you on this. I get the sense that it would say, yeah, actually I would , I wanna do more than this, but I'm , I'm going really gentle. 'cause I'm not sure if anybody has the appetite to tell counties that they can't have massive zones of exclusion.
Speaker 1:This is a good opportunity to bring in Lisa May, we are working with the administration. Some of the legislation has been introduced. We believe that there's other, other legislation on the way this session. We agree there's an incrementalism issue here, <laugh> , we wish also that we could be bolder, but we also understand as, as you actually perfectly articulated, that incrementalism may be the way to go because of the nature of the stranglehold that local governments have on land use issues in Maryland. And I just wanna clarify, you planning, you mentioned planning outside of zoning planning and zoning are not the same thing. Zoning is very different than planning. And so let's, let's keep that distinction in mind as, as we discuss some more specific issues. So Lisa, what, what is the state of the package, not just the administration, but other maybe Maryland legislature , uh, legislators that we think are gonna hopefully address some of these issues and even ideally move the needle?
Speaker 3:Certainly. And you know, I, I do agree with Celine and Chuck. You know, that we have expressed our frustration of really how timid Maryland has been. Just look back to the A DU legislation and needing to study that for two years when other states have been implementing it. A A RP has written essentially the rule book on it, and there just really has been this reluctance even amongst state officials to exercise their authority over locals and , and that stranglehold that they have over planning. We are seeing a bigger focus on housing this session than we have probably at , at any point during the last five, six years here in Maryland. The governor has a three pronged housing package that he has announced this. In fact, just this week that we're recording this podcast, the bill numbers have been introduced and he has, you know, of the three pillars. We have housing financing, which is really a government action for dedicated, subsidized, affordable housing units. He has housing supply, which is one that we are of course certainly very excited and, and very ready to go on. And then also protections for renters for the housing supply. What is really exciting is that for the first time we are putting into, you know, our Maryland code and our Maryland housing plan, things like missing middle housing, duplexes, triplexes, cottage courtyards, all of these housing types that, that used to exist and used to really serve the populations that are struggling right now to find housing. They have narrowed it. I, I think Salim is right. It is modest. On the other hand, it is also then hopefully achievable.
Speaker 1:We expect opposition. Of course. What is your sense purely politically , uh, is the, are local governments getting this message?
Speaker 3:I think some of them are, you know, there are going to be, I think more than outright pitchforks and torches opposition to these bills. I think it's gonna be more measured. Like we're, we're talking about allowing these housing types in transit oriented development in our growth areas and for projects that have some sort of percentage of dedicated affordable housing. So it's not the wholesale overriding of state authority that we have seen, as you mentioned, through Oregon or through the Montana Miracle. So I think that they recognize that the administration tried to at least give some consideration to maintaining some local control, but while also pushing the needle forward so I could see them, you know, say , Hmm , maybe we should cut back on the amount of properties or projects that, that these rules apply to. But I , I don't think we're gonna see the outright hostility that we have in prior sessions, just because we're getting to a point where the writing's on the wall that we have to do something. And for those of you who are aware of the comptroller of Maryland's recent report on our economy, that really shows that our economy's kind of stagnating. Right. And and housing's a part of it.
Speaker 1:Yeah, housing's a big part of it. And, and that's what I attempted to link those two things. And, and when we bring Celine back in to help us illustrate that even further if necessary, that this is not just something that needs to be seen in isolation. That, that these are true economic development opportunities. And I think, I know , I wish employers would be more outspoken about it , uh, because, you know, they, they are a lot of the ones who are struggling to fill jobs. And as we can see, this economy chugging along, what, 3.3% growth in fourth quarter last year, something like that, inflation easing and consumers feeling better that there are gonna be more and more employment opportunities. Um, if we can't find workers or workers can't afford to live here. It's all for Naugh . And, and I think to see the interconnectedness of all these is one of the most important things we can do. Celine, would you, would you agree with that or have a different perspective?
Speaker 2:Yeah, that's especially true, you know, in the DC region where employers have a choice of jurisdictions. Yeah . Right. So if, if you're thinking about, okay, I'm gonna, you know, I guess Amazon is a celebrated case, but this happens for much smaller employers on a daily basis, I'm gonna add a new office, I'm gonna start my business, I'm gonna move my business to the , to the capital region. Do you go to Virginia? Do you go to Maryland? Maybe DC and, you know, what does Maryland have to offer? Right? There's , there's obviously some pros and cons to each side, but you know, a big piece of it for employees is like, you know, where are you gonna live and how's your commute? Right? So , uh, one kind of employer says, okay, we're gonna be right in the middle of dc . Everyone's gonna be able to take metro. It's gonna be more expensive. But you, you don't have to drive lots of other employers. Most employers in our region, they, they expect their employees are gonna drive and they're gonna need houses within a 20, 30 minute drive to feel really happy about working there. And so what are we offering for the money that we're reasonably competitive with Virginia now, but we're less competitive on some other dimensions. And so like, you know, you , you gotta lean where you can. And if Maryland can be the place where your money goes further, you know, that that talks really loud. And for a lot of employers, that's gonna be a , a decisive factor in where they choose to make, to look at their business.
Speaker 1:Yeah. And I think it's very real. You mentioned , uh, you know, your anecdote, mine was a , a young man who was going to be graduating from Hopkins this year, and, you know, even he said, yeah, there were plenty of opportunities here, but I can't, there's no way I'm, he wasn't from here <laugh> . And he said, I'm going back to Asheville. It's a , why would I get the same house for a third of the cost different environment down there. But yeah, I'm , I , there's no way I am, I can afford to stay here and start a life. I just, it's just too expensive. And there's just not that many opportunities to have that balance, especially younger people want. And as we see the, the , the number of first time buyers continue to go down, that should ring alarm bells all over the place, especially for employers.
Speaker 2:Yeah, absolutely. You know, this gets us back to, you know, what kinds of housing we're building, right? So you can say, okay, we're gonna , we're gonna permit lots more housing and it's gonna be quarter acre lots, you know, out in Frederick County, and they're gonna be quite expensive. That's what some people want. But you know, there's a lot of folks who, who don't want that. And you do run outta land pretty fast when you're, you know, burning it at one, one , uh, four , four units to the acre. The governor's proposal is to allow middle housing, so like cottage courts, which is like four, four little cottages around a , a courtyard or duplexes within a mile of transit. So that's a like mm-Hmm . <affirmative> that goes outside the kind of the immediate transit core where you , you know, there ought to be large apartment buildings right next to the transit stations and, and businesses and goes into the area where you might reasonably walk or bike to, to the transit. And, you know, I think the , the big limitation in the plan right now is that one of those units in every missing middle development would have to be deed restricted, affordable. So that means one person is getting a below market rate, and you have to go through a lot of paperwork. It's a big hassle. And there's a big kind of markdown in price just to like, even regardless of the affordability, just to convince tenants to be willing to give all that information to the, to their landlord to qualify , uh, you have to be getting a big, a big , uh, discount on rent to be willing to do that. So, you know, some friends of mine at the American Enterprise Institute, they, they modeled this and they said, well, with as written, if they did a really good job on the sort of the dimensional aspects of, you know, how the housing can be shaped, setbacks, things like that, if they did a great job on that, but left the affordability piece, the proposal would generate something like 500 new housing units a year. But if , uh, if they got rid of the affordability mandate, it actually wouldn't raise the price much because, you know, small townhouses are kind of at that price level anyway, where Yeah . Yeah . Purchase affordable for someone at 60 or 70% of the area median income. Mm-Hmm . <affirmative> , you'd get five times as much new housing constructed . And so you'd be looking at more like 2,500 new housing units a year net of any demolition that would be more affordable than even the housing that's replacing and far more affordable than, you know, the McMansions that get built with every tear down in my neighborhood. Yeah.
Speaker 1:That's, I I did not know that. That's fascinating because that informs policy, right? And that's, I think, what we're missing. We're missing that bold leadership that takes those things into account and can articulate it. And, and of course, one of the things that we have been adamant about stressing is again, the role of various levels of government. And I have all the sympathy in the world for a city council, a county council, county commission, when the , when a development is proposed, especially with new housing is proposed, that all they hear are the opponents. Mm-Hmm . Except the developer is the proponent <laugh>. And then you have the charette and 45 people show up, not a single person is , is speaking in favor of the development. And it's all about adequate public facilities and overcrowded roads, overcrowded schools, water, sewer, police, fire, et cetera. And yet they are the closest those, those local policy makers are the closest to those voters. So you have a choice. If you're a , a local elected official, you can listen to the people who elected you, who are in front of you saying that they oppose this new housing or unknown people <laugh> , who are yet to come to whom you owe nothing, and where, where , where are you gonna go? Uh , and so , uh, this , the nimbyism is, is to me, we can talk about the policies, but when the rubber hits the road, this is a purely political act at the end of the day. Right. And how do we get that bold leadership when there is such almost united, almost universal community opposition to really almo even the most modest new housing that that that confounds me. And I, I don't know the answer, I really don't. But it's that , do you agree that it's a probably a bigger problem than the policy prescriptions we're advocating?
Speaker 2:So I, I think things are, are less bad and we're starting to learn through polling and some other things. So this , first of all, there's now people who are showing up and saying yes. So I , that's, that's part of it. Is that the , the pro housing movement Yes. In my backyard there
Speaker 1:Are some mbs Yeah. Right, <laugh> . Yeah.
Speaker 2:You know, and it only takes a few voices to, to show up and say yes. And then, then as a politician, you say, look, the room is mixed, and I , the exact mix of these 45 or 15 people isn't that important in a jurisdiction with a hundred thousand. And, and that's the bigger point, is when you ask people, should we allow more, you know, small apartment buildings in our neighborhoods, most people say yes when politicians who fight for more housing go to the ballot box after four years, they get reelected.
Speaker 1:Okay .
Speaker 2:And the, the people who show up, they're very passionate and I they're very sincere. Mm-Hmm . <affirmative> . But there aren't many of them. And the fact that they are willing to show up on a Tuesday night has more to do with their own personal lives and, and the constraints that they don't have then it does with their representation of the larger community. So I think politicians are learning this. A few people took risks. Most of them did not lose their jobs, but got reelected. And people say, oh, okay. The fact that these same 27 people show up at every single city council meeting and say no to everything tells me two things. First, it tells me they , they, they need a better hobby. Like, but second, it tells me , <laugh> , they're gonna say no to everything no matter what. There's no proposal. Right. So I , I know these folks in my neighborhood and I , I know that they love the town and they're, they're really afraid of change. And they, they're afraid that anything that changes will hurt the town. And they don't realize the town is changing on its own. Right. The , the incomes are higher, the home prices are like two or three times what they were a decade ago. And it's changing. So like, their fear of change is misplaced, the status quo of law creates changes on the ground and they , they're gonna be opposed to anything, any proposal from any developer, from any planning board, they're gonna have 17 things that are wrong with it. They're never gonna say, yeah, that's great. Let's, let's try something new. And I think if you see those folks every week, you probably learn Yeah. They , it's not actually about the content of the plan. This is not thoughtful opposition that says , I don't want things to change and you're never gonna satisfy me. And it's a small number of people because it's the same people every week. You know, you're pretty sure who it's gonna be. You , you know who you're getting those angry emails from. 'cause it's the same people who sent you an angry email last week and the sort of, the majority of voters, they're not emailing 'cause they're happy with you. They don't mind. Go ahead. Sure. I, you know, my neighbor around the corner has an accessory dwelling unit in their backyard. Like, that's nice. Maybe my parents will be able to rent it when they come to spend six months living in the area. It's , that's a actual situation for, for my family. They rent it , its company's accessory billing unit. So my dad could do a sabbatical here and , and be in our neighborhood. That was great. We were really glad they had that A DU .
Speaker 1:Yeah. Very cool. So Lisa, we'll we'll end on, on that note and thank you Ian for some, for talking me off the ledge. What, is there something to be said for perhaps a notion among local elected officials that maybe it's not so bad if the state steps in to put that kind of buffer between them and these things that might otherwise be opposed by the voters they are closest to? Is there anything to that or is that just a thing I made up?
Speaker 3:N no, I mean we've heard that anecdotally. I I don't know that any local official has been brave enough to come out and say it publicly, you know? Yes. Well, maybe one, I think there was maybe one during the a DU debate that said, okay , no , we, local government people are messing up so badly. Please take this off of our hands. But no, we, we have, have heard that there is something to the fact of, you know, public kind of opposition from local governments, but quietly saying, yeah, if you guys are willing to take the heat on this , uh, that's not the worst thing in the world.
Speaker 1:On that note, all unfortunately, I think I could go on and on. So thank you all for your time. I really do appreciate you guys joining us today. I hope that was informative, Celine . Thank you, Lisa. Thank you.
Speaker 4:Thank you, Chuck. It's been a pleasure.
Speaker 3:Anytime .
Speaker 1:And to our listeners, thank you for the privilege of your time. This is Get Real Estate, the Maryland Realtors Podcast. I'm Chuck Caskey , Maryland Realtors, CEO. Thanks as always. To our esteemed producer, Joshua Woodson, please subscribe wherever you get your podcasts. Like us, share us, give us five stars if we've earned them. And most importantly, give us feedback, including guests you'd like us to invite or topics to explore. Be kind, stay safe, working together and speaking with one voice. Maryland Realtors can help facilitate creation of missing middle housing reform, condo lending restrictions, adopt new building techniques like penalized homes, improve financing for existing homes. And we also need alternative lending models to improve minority home ownership rates. That could be a future podcast as well. As you can tell from today, we have lots of work to do, but we are as committed as ever to seeing it through.